On Approximate Pricing of Spread Options via Conditional Value-at-Risk

It is widely accepted to use conditional value-at-risk for risk management needs and option pricing. As a rule, there are difficulties in exact calculations of conditional value-at-risk. In the paper, we use the conditional value-at-risk methodology to price spread options, extending some approximation approaches for these needs. Our results we illustrate by numerical calculations which demonstrate their effectiveness. We also show how conditional value-at-risk pricing can help with regulatory needs inspired by the Basel Accords.

Neutralizing currency risk in procurement via hedging

The article discusses the concept of currency risk arising in foreign trade procedures and defines currency risk types: operational, translational, economic and hidden risks. The main factors influencing exchange rate are determined: level of inflation, interest rates in different countries, state of current accounts, amount of public debt, terms of trade and political stability. Methods of assessing currency risk using the Value-at-Risk methodology are presented: historical modeling, variancecovariance model, Monte Carlo modeling. Exchange-traded and overthe-counter currency risk management tools, such as options, futures, forwards, swaps, debt contracts, and natural hedging methods, are described in detail. Practical examples of using these tools to neutralize currency risk are also given.

Sensitivity and Uncertainty Analyses of Human and Organizational Risks in Fire Safety Systems for High-Rise Residential Buildings with Probabilistic T-H-O-Risk Methodology

Given that existing fire risk models often ignore human and organizational errors (HOEs) ultimately leading to underestimation of risks by as much as 80%, this study employs a technical-human-organizational risk (T-H-O-Risk) methodology to address knowledge gaps in current state-of-the-art probabilistic risk analysis (PRA) for high-rise residential buildings with the following goals: (1) Develop an improved PRA methodology to address concerns that deterministic, fire engineering approaches significantly underestimate safety levels that lead to inaccurate fire safety levels. (2) Enhance existing fire safety verification methods by incorporating probabilistic risk approach and HOEs for (i) a more inclusive view of risk, and (ii) to overcome the deterministic nature of current verification methods. (3) Perform comprehensive sensitivity and uncertainty analyses to address uncertainties in numerical estimates used in fault tree/event trees, Bayesian network and system dynamics and their propagation in a probabilistic model. (4) Quantification of human and organizational risks for high-rise residential buildings which contributes towards a policy agenda in the direction of a sustainable, risk-based regulatory regime. This research contributes to the development of the next-generation building codes and risk assessment methodologies.

A Fiscal Rule to Achieve Debt Sustainability in Colombia

In order to enhance fiscal sustainability and regain “investment grade” credit rating, in 2011 Colombia implemented a fiscal rule (FR) on the Central Government's structural balance. Investment grade was rapidly attained, and FR targets were complied with, until 2019. Using the Synthetic Control Method, we provide evidence that the FR promoted fiscal discipline. Nevertheless, public debt has increased continuously and is now expected to exceed 60 percent of GDP, in large part driven by the pandemic. We argue that the FR should be reformed so as to incorporate a debt anchor. Using a regime change model and the IMFs buffer risk methodology, we show that the prudent debt level should not exceed 48 percent of GDP and that in order to achieve this in the medium term, a policy mix increasing revenues to 17.8 percent of GDP (from 15.5 percent during 2016-2019) and reducing primary expenditure to 15 percent (from 16 percent during 2016-2019) is required. FR's performance would also benefit from changes in its institutional design.

Increasing Project Success in China from the Perspectives of Project Risk, Methodology, Tool Use, and Organizational Support

Besides lack of organizational support, using project risk management tools and methodology effectively has been one major challenge to project success. As China is extending its project management (PM) concepts from mainly construction and national defense projects to many other industries, project managers in those new industries rely on the use of PM tools and methodologies. However, it remains unclear to what extent the use of them can increase project success. To address the research questions, this study surveyed 93 project managers in China and found that success of project execution is contingent upon: (a) project risks, (b) PM methodology, (c) organizational support, and (d) PM tool use. The presence of project risk can stimulate increased use of PM tools, thereby helping achieve project success. Organizational support and PM tool use also remain conditions for project success. This study contributes to the current literature by assessing project success from the perspectives of organizational support, PM methodology, and PM tools.